And its central bank is running out of monetary weapons to fight
those issues. That's a nasty mix that has everyone worrying how
the decline of China might hurt everyone else.

But it's also incredibly complicated, involving the links between
state-owned enterprise debt, the renminbi, commodity prices, and
whether any of those things might drag down Western economies.

Nonetheless, Societe Generale's global head of economics, Michala
Marcusse, elegantly summed it all up in two sentences and this
chart, which shows how state-owned and private companies in China
had become increasingly unprofitable over the past four years:

SocGen

If China's inability to pay its debts triggers a financial crisis
in the country, Marcusse asks, "What are the channels of
spill-over globally?" Here's her answer:

A miserable cocktail of China hard-landing in the secondary
sector (industry and construction), a slump in commodities,
exacerbated by a further build-up of excess supply and a stronger
dollar, have put balance sheets of commodity producers and
several major emerging economies under significant pressure. Fear
is both that things in China get even worse and that a domino of
defaults will engulf commodities and EM [emerging markets],
ultimately contaminating the full credit universe.